UK’s financial regulator is examining whether some digital representations of physical gold should sit outside existing fund rules, as part of a wider push to modernise wholesale markets and keep London at the centre of global bullion trading.
The Financial Conduct Authority (FCA) is working with the Treasury and the Bank of England to consider a dedicated approach for tokenised gold, or possibly tokenized commodities more broadly.
One option under review is a targeted exemption from the collective investment scheme and alternative investment fund regimes.
No final decision has been taken. Officials have stressed they remain open to different models.
Tokenized gold consists of digital tokens that confer ownership rights in physical bullion held by an issuer or custodian.
The metal stays in vaults while the tokens can be transferred electronically.
Industry participants have told the regulator that uncertainty about whether these products fall inside conventional fund rules could limit the range of investors able to hold them.
Jon Relleen, the FCA’s director of infrastructure and exchanges, said tokenised gold had emerged as a point of interest in talks with market participants.
The regulator wants to understand whether current frameworks still suit gold markets and how digital innovation might improve efficiency and competitiveness.
London already accounts for a large share of worldwide gold trading.
Tokenization could make it simpler to divide, move and pledge bullion as collateral without the operational friction of transferring physical bars.
Regulators have previously flagged tokenized gold as a possible form of collateral for uncleared over-the-counter derivatives, provided industry standards are developed.
The work sits inside a broader UK effort to bring wholesale markets onto digital infrastructure.
That includes tokenized securities, collateral arrangements and settlement systems.
The Bank of England is separately considering whether tokenised assets, including certain stablecoins, could be accepted as collateral in its Sterling Monetary Framework and by central counterparties.
The discussions build on earlier engagement with banks and other firms, as well as policy work on fund tokenisation completed earlier in 2026.
Existing authorised funds are already permitted to invest in tokenised versions of eligible assets.
The latest review focuses on whether certain gold-backed tokens or related market infrastructure should be carved out of fund-style regulation altogether so they can circulate more freely in wholesale markets.
Supporters argue the change could unlock more of London’s stored gold for use in financial transactions while helping the City compete with other centres, including China.
Critics of overly rigid application of fund rules say it risks treating a simple claim on allocated metal as if it were a pooled investment vehicle.
Any exemption would be narrow and would still leave tokenised gold subject to other regulatory requirements covering custody, market integrity and financial crime. The authorities have not published draft rules. Further details are expected as part of ongoing work on tokenization in wholesale finance.